Fitch affirms Adani Transmission restricted group's notes at 'BBB-'

Fitch has affirmed the ‘BBB-’ rating on senior secured notes issued by the restricted group of Adani Transmission and has said its outlook is stable.

The restricted group (ATL RG1) includes six co-issuers – Barmer Power Transmission Service, Chhattisgarh-WR Transmission, Hadoti Power Transmission Service, Raipur-Rajnandgaon-Warora Transmission, Sipat Transmission, and Thar Power Transmission Service – and one non-issuing SPV, Adani Transmission (Rajasthan) (ATRL).

The credit assessment reflects the project companies’ availability-based revenue under a supportive regulatory framework, with low technical complexity, reflected in high availability levels. It expects operating performance of entities to remain stable.

However, the project companies have longer-term residual exposure to inflation in light of the mismatch between the operating and maintenance (O&M) cost escalation rates and the largely un-indexed revenue base.

ATL RG1’s credit assessment is not directly affected by the allegations of  malpractices at Adani group made by US-based short seller Hindenburg Research.

Offshore bond holders benefit from a robust cash flow waterfall mechanism and covenants that restrict cash upstreaming to shareholders and limit indebtedness. There are no material short to medium-term debt maturities reducing near-term liquidity and refinancing risks. The shareholder loan at ATL RG1 level is also minimal, the agency added.

Some projects are also exposed to heightened payment delay risks associated with long-term transmission customers in Rajasthan, which could result in increased working capital requirements.

The restricted group’s financial profile is stronger than that commensurate with a ‘BBB-’ rating for this portfolio of assets, reflecting considerable rating headroom at the current level. The credit assessment is constrained by India’s ‘BBB-’ country ceiling.